The Labor Department reported yesterday that Oregon's unemployment rate soared to 12.4% in May, the nation's second highest after Michigan's 14.1%. What to do? If you're the geniuses in the state legislature in Salem, you naturally raise taxes.

Last week the legislature approved a $2 billion tax hike on personal income and small businesses that haven't already left the state. The highest tax rate on income above $500,000 would climb to 11% -- up from an already high 9%. Oregon will soon boast the second highest income tax rate in the nation, moving ahead of California (10.55%), and only slightly behind New York City (12.6%). Corporations will pay a 7.9% tax on gross receipts, up from 6.6%.

To be fair, Oregon does not really have a sales tax, so it is hard to compare apples and oranges on taxes. But missing from the article is another factor in their unemployment, and the reason our company ultimately had to leave the state: Oregon has the second highest minimum wage in the country (just behind Washington State and just ahead of California), and it is getting higher every year as it is automatically indexed to something or other that seems to be rising faster than inflation.

It is often said that one of the "problems" with American health care is that we spend far more on health care as a percent of GDP than other nations. But why is this necessarily a problem?

The US is the wealthiest nation on Earth, top to bottom. At every level of society, except perhaps for a few recent immigrants, people in this country are wealthier than their peers in a similar income quintile in another country, even Europe. So it is not surprising that basic needs, like food and housing, might represent a smaller percentage of GDP here than in other nations. Despite all the efforts of McDonalds and the Country Buffet to change things, there is only so much food we can consume, only so much living space we need, only so many cars we can drive at one time.

As these basics fall as a percentage of our income, something must gain. It could be savings, but it could also be other spending where incremental outlays return percieved incremental benefits. And so, why not health care? What could possibly be more important than extension of our lives and/or the improvement of the quality of our living? If we as a nation choose to spend our extra wealth on such things, is this really a bug, or a feature?

Update: Yes, I know, the problem is that we aren't really always able to make this decision as individuals optimizing our own tradeoffs. We are too often forced to accept someone else's tradeoff. Unfortunately, this problem is only going to get worse under any plan Congress is currently considering. Someone else who is not you and doesn't even know you will decide how much a procedure is worth for you.

And as I watched the deniers make their arguments, I couldn't help thinking that I was watching a form of treason "” treason against the planet.

To fully appreciate the irresponsibility and immorality of climate-change denial, you need to know about the grim turn taken by the latest climate research"¦.

Well, sometimes even the most authoritative analyses get things wrong. And if dissenting opinion-makers and politicians based their dissent on hard work and hard thinking "” if they had carefully studied the issue, consulted with experts and concluded that the overwhelming scientific consensus was misguided "” they could at least claim to be acting responsibly.

But if you watched the debate on Friday, you didn't see people who've thought hard about a crucial issue, and are trying to do the right thing. What you saw, instead, were people who show no sign of being interested in the truth. They don't like the political and policy implications of climate change, so they've decided not to believe in it "” and they'll grab any argument, no matter how disreputable, that feeds their denial"¦.

Still, is it fair to call climate denial a form of treason? Isn't it politics as usual?

Yes, it is "” and that's why it's unforgivable.

Do you remember the days when Bush administration officials claimed that terrorism posed an "existential threat" to America, a threat in whose face normal rules no longer applied? That was hyperbole "” but the existential threat from climate change is all too real.

Yet the deniers are choosing, willfully, to ignore that threat, placing future generations of Americans in grave danger, simply because it's in their political interest to pretend that there's nothing to worry about. If that's not betrayal, I don't know what is.

So is it fair to call it willful blindness when Krugman ignores principled arguments against catastrophic anthropogenic global warming theory in favor of painting all skeptics as unthinking robots driven by political goals? Yes it is.

I am not entirely sure how Krugman manages to get into the head of all 212 "no" voters, as well as all the rest of us skeptics he tars with the same brush, to know so much about our motivations. He gives one example of excessive rhetoric on the floor of Congress by a skeptic "” and certainly we would never catch a global warming alarmist using excessive rhetoric, would we?

Mr. Krugman, that paragon of thinking all of us stupid brutes should look up to, buys in to a warming forecast as high as 9 degrees (Celsius I think, but the scientist Mr. Krugman cannot be bothered to actually specify units). In other words, he believes there will be about 1 degree per decade warming, where we saw exactly zero over the last decade. Even in the panicky warming times of the eighties and nineties we never saw more than about 0.2C per decade. Mr. Krugman by implication believes the the Earth's climate is driven by strong positive feedback (a must to accept such a high forecast) "” quite an odd assumption to make about a long-term stable stystem without any good study showing such feedback and many showing the opposite.

But, more interestingly, Mr. Krugman also used to be a very good, Nobel-prize winning economist before he entered his current career as political hack. (By the way, this makes for extreme irony - Mr. Krugman is accusing others of ignoring science in favor of political motivations. But he is enormously guilty of doing the same in his own scientific field). It is odd that Mr. Krugman would write

But in addition to rejecting climate science, the opponents of the climate bill made a point of misrepresenting the results of studies of the bill's economic impact, which all suggest that the cost will be relatively low.

Taking this statement at face value, a good economist would know that if the costs of a cap-and-trade system are low, then the benefits will be low as well. Cap-and-trade systems or more direct carbon taxes only work if they are economically painful for energy consumers. It is this pain that changes behaviors and reduces emissions. A pain-free emissions reduction plan is also a useless one. And in fact, the same studies that show the bill would have little economic impact also show it will have little emissions impact. And thus it is particularly amazing Krugman can play the "traitor" card on 212 people who voted against a bill nearly everyone on the planet (including the ones who voted for the bill) know will not be effective.

I remember the good old days when Democrats thought it was bad when Republicans called folks who did not agree with them on Iraq "traitors." After agreeing with Democrats at the time, I am disapointed that they have adopted the same tactic now that they are in power.

Now comes the CBO with yet more news of the sort that neither Capitol Hill nor the White House is likely to welcome: its freshly released report on the federal government's long-term financial situation. To put it bluntly, the fiscal policy of the United States is unsustainable. Debt is growing faster than gross domestic product. Under the CBO's most realistic scenario, the publicly held debt of the U.S. government will reach 82 percent of GDP by 2019 -- roughly double what it was in 2008. By 2026, spiraling interest payments would push the debt above its all-time peak (set just after World War II) of 113 percent of GDP. It would reach 200 percent of GDP in 2038.

This huge mass of debt, which would stifle economic growth and reduce the American standard of living, can be avoided only through spending cuts, tax increases or some combination of the two. And the longer government waits to get its financial house in order, the more it will cost to do so, the CBO says.

Unfortunately, the answer to the question of when Obama will take ownership of the debt crisis he is causing is likely "never." The most likely scenario is that Obama demands that we taxpayers, many of us who opposed his actions that led to this run-up of debt, take ownership for this debt via substantially higher taxes.

The original was a sort of surprise -- one expected a movie based on a toy franchise to suck, but it was actually OK. It had a bit of wit, probably Spielberg's influence. The new movie is not nearly as good. I give it about 2.5 stars, with that being an average of 1.5 stars when Megan Fox is off the screen and 5 stars when she is on the screen. The director avoids doing anything to advance the plot when she is on the screen, which is good because it is hard to concentrate during those moments.

The one highlight for me was that most of the college scenes were filmed at my old alma mater Princeton. With all due appologies to my friends, there is a certain amount of cognitive dissonance to seeing 40 or 50 consistently smoking hot college girls wandering around the Princeton campus. We had a name for women like that when I was there -- we called them "visitors."

One bit of credit -- unlike a lot action movie sequels, the plot was mostly coherant. The humor was strained, more sophomoric and less witty than the original. Thedogs having sex in the beginning was gratuitous, for example.

Anyway, my kids enjoyed it, and it was a decent way to spend a summer afternoon when it was 107 outside. Air conditioning always adds at least 1 star to every movie during a Phoenix summer.

I almost never publish links posts. But I was really stuck when I read Radley Balko's Saturday Morning Links post because every one was awesome. Balko is not only one of the best bloggers out there, but a great journalist as well in a field of us pundits who put on pretensions of being pajama-clad investigators. So here are all of his morning links:

The whole Guantanamo issue has to be one of the great bait and switches of our time. The fundamental human rights abuse was always the notion that civilians could be seized by the US Government and held, as they say in Britain, at the President's pleasure (ie as long as the Administration wants, up to and including forever).

Somehow, this whole issue got perverted into a debate about Gitmo, rather than detentions per se. I warned any number of times that if we kept focusing on merely the location of detention, rather than detention itself, it would give the government cover to close the facility and declare victory, while continuing the abusive practice of indefinite detention.

Unfortunately, I was right, both in this fear and my fear that Obama, once give presidential power, would be reluctant to eschew it.

Obama administration officials, fearing a battle with Congress that could stall plans to close the U.S. prison at Guantanamo Bay, are crafting language for an executive order that would reassert presidential authority to incarcerate terrorism suspects indefinitely, according to three senior government officials with knowledge of White House deliberations.

Such an order would embrace claims by former president George W. Bush that certain people can be detained without trial for long periods under the laws of war. Obama advisers are concerned that an order, which would bypass Congress, could place the president on weaker footing before the courts and anger key supporters, the officials said.

Unsurprisingly, after talking about various approaches for Congressional or Judicial oversight of Administration detention decisions, the Administration has apparently dropped plans for this. Even the "security courts" of which I have always been suspicious (I always picture a jury full of TSA airport security screeners) have been ruled out by Obama. We are back to the Bush doctrine of detention at the President's pleasure.

In partnership with regional chapters of the charity group Crimestoppers U.K., multiple local police forces have launched a program called "Too Much Bling? Give Us a Ring." The object of the program is to encourage people who suspect that a neighbor or acquaintance is living off the proceeds of crime to anonymously provide information about that person to the police...

A key component of the "Too Much Bling?" program is its effort to tap into any resentment and anger members of the public may feel toward suspected criminals.

In a release issued by the Sussex Police Department, which used the program to help seize more than £1.5 million between April and December of last year, Detective Sergeant Mick Richards said, "Members of the public are sick and tired of seeing people with no legitimate income living a lavish lifestyle. We are working hard towards taking the cash out of crime making use of all the powers granted to us under the Proceeds of Crime Act and other legislation.

"I am very aware that in these difficult times how disheartening it is to see people 'flashing the cash' when you know that it has come from a life of crime and that they appear to be 'getting away with it,'" he said.

There actually was a US Route 666, in the four corners area. It was renumbered under pressure from Christian groups, and for the pragmatic reason that people kept stealing the signs (I would love to have one). Apparently there was a horror film by that name, but it couldn't be as good as the classic Interstate-60, an exploration of freedom and slavery that is one of my favorites and should be on the must-see list of every libertarian.

In one e-mail exchange, University of Illinois Chancellor Richard Herman forced the law school to admit an unqualified applicant backed by then- Gov. Rod Blagojevich while seeking a promise from the governor's go-between that five law school graduates would get jobs. The applicant, a relative of deep-pocketed Blagojevich campaign donor Kerry Peck, appears to have been pushed by Trustee Lawrence Eppley, who often carried the governor's admissions requests.

When Law School Dean Heidi Hurd balked on accepting the applicant in April 2006, Herman replied that the request came "Straight from the G. My apologies. Larry has promised to work on jobs (5). What counts?"

Hurd replied: "Only very high-paying jobs in law firms that are absolutely indifferent to whether the five have passed their law school classes or the Bar."

Props to Heidi Hurd for such a sharp response. The scale is pretty staggering:

Gov. Pat Quinn convened a state commission to investigate the U. of I. admissions process after the Tribune revealed that more than 800 undergraduate applicants in the last five years received special consideration because they were backed by U. of I. trustees, legislators and others in powerful posts.

That's 160 a year! I don't know how large the law school is, but that must be a respectable portion of the class. via Glenn Reynolds

There is some sort of weird mass self-hypnosis going on, made even odder by the fact that a lot of people seem to know they are hypnotized, at least at some level. I keep getting shushed as I make fun of friends' cult behavior watching the proceedings today, as if by jiggling someone's elbow too hard I might break the spell. Never have I seen, in my lifetime, so much emotion invested in a politician we know nothing about. I guess I am just missing some gene that makes the rest of humanity receptive to this kind of stuff, but just for a minute snap your fingers in front of your face and say "do I really expect a fundamentally different approach from a politician who won his spurs in "¦. Chicago? Do I really think the ultimate political outsider is going to be the guy who bested everyone at their own game in the Chicago political machine?"

Lots of eulogizing going on. This one on Ayn Rand and Fawcett is certainly unique, though. Don't think that will make 20/20 tonight.

Postscript: Yes, I am of that age that I had her famous poster on my wall (Fawcett, not Rand). Ms. Fawcett was a member of my personal klutz-to-the-stars club. I once got an ink spot on her white blouse awkwardly trying to get an autograph (back when I used to value such things). I have also stepped on Raul Julia's foot at the academy awards, slammed a door open into Martina Navratalova's face at a hotel in Houston, thrown up in Neal Armstrong's bed at a ranch in Wyoming, and spilled a large fountain drink on Brooke Shields at Princeton.

As I wrote before, Waxman-Markey puts most of the onus for CO2 reduction on refiners and transportation fuels, so that is the area we will see the most price increase if the bill passes.

So I ask you, after putting this huge effective tax on refiners, which will also in some cases force refiners to shut down capacity and produce less fuel, how long will it be before a politician starts to demagogue oil companies for rising gasoline prices and/or fuel shortages?

This is at the end of the day why Congress wanted cap-and-trade rather than a carbon tax. By putting the tax on unsympathetic targets like oil companies, Congress and Obama can pretend that inevitable consumer price increases are the oil companies greedy fault, and not related to the actions in Washington.

The whole point of cap-and-trade (or a carbon tax) is to set broad costs of emissions or broad tradeable limits, and then let millions of individual consumers and industries figure out the most effective way for each of them to meet these costs or limits. For example, if I were to have a personal cap, changes in my car's MPG would be meaningless, because my work is 1.9 miles from my house. I would probably start with putting the film coating on my windows of my house I have been considering. They guy in New Jersey who drives 45 miles to work and has a small house might have a different solution.

But this whole philosophy of letting individuals drive the bus flies in the face of everything Congress believes in. They believe they are smarter than you or I, and thus they should pick the solutions, not us. And allowing for individual action doesn't generate campaign contributions like picking winners does.

So despite being a cap-and-trade bill, Waxman-Markey essentially picks winners. One way is through targeted investments of taxpayer money in technologies whose owners have lobbied hard before Congress. Another is this:

The legislation will drive up individual and commercial consumer's fuel prices because it inequitably distributes free emissions "allowances" to various sectors. Electricity suppliers are responsible for about 40% of the emissions covered by the bill and receive approximately 44% of the allowances "“ specifically to protect power consumers from price increases. However the bill holds refiners responsible for their own emissions plus the emissions from the use of petroleum products. In total refiners are responsible for 44% of all covered emissions, yet the legislation grants them only 2% of the free allowances.

This means that Congress has decided to extract all of the CO2 reduction from transportation and other refined fuel users, rather than from electrical power generation. Is this because they have some study in hand that shows the best bang for the buck in reducing CO2 comes from transportation? Of course not, and even if they did, it would be hard to believe given the number of large coal plants in this country that generate far more CO2 than even a fleet of Escalades.

No, the reason for this is purely political -- every representative has an electric utility in their district lobbying and paying campaign contributions, but few have organized lobbies of automobile drivers. And so, rather than pushing for fuel shifts from coal to gas or nuclear in power generation, this bill will primarily achieve its meager results from making it more expensive for people to drive.

House Democrats narrowly won a key test vote Friday on sweeping legislation designed to combat global warming and usher in a new era of cleaner energy. Republicans said the bill included the largest tax increase in American history.

The vote was 217-205 to advance the White House-backed legislation to the floor, and 30 Democrats defected, a reflection of the controversy the bill sparked.

Interestingly, Democrats are selling the bill by saying it won't work. Since a cap-and-trade scheme can only succeed if it changes consumer consumption patters, it must impose costs on consumers to work. But...

"The bill contains provisions to protect consumers, keep costs low, help sensitive industries transition to a clean energy economy and promote domestic emission reduction efforts," the White House in a statement of support for the legislation.

Next stop, Senate, where the bill has even more of an uphill climb.

Update: Final tally on the main vote was 219-212. Of course absolutely no one who voted "yea" has any idea what they voted for, since no one can even produce a copy of the bill, much less attest that he or she read it.

I have been a frequent detractor of Windows Vista. However, after playing around with the Windows 7 beta for a while, I am very encouraged about this new OS. For a limited time, Microsoft is offering pre-order sales of Windows 7 home and pro upgrade packages (these require you to already have Windows on your computer). Prices are $49.99 and $99.99 respectively, which represent a 50% discount to the planned prices of these products at roll-out. I already bought 3 copies from Amazon (that is the limit, apparently, that Amazon is setting). Delivery is not until some time in October.

I am again hearing rumblings that the climate bill may pass the House. If so, it will be interesting to see what last minute bribes were added to make this happen. The most recent bribe we know about is the commitment to pay farmers not to grow crops with the weak window dressing that this is somehow a carbon offset.

The logic behind this farm offset provision is actually hilarious, as it undermines years of BS arguments by corn ethanol supporters. These ethanol supporters have argued, against the results of every study ever conducted outside of a state school in the corn belt, that the CO2 used in growing corn and processing it into ethanol is less than the CO2 absorbed by corn while growing.

But the argument of farmers in the recent climate bill is that farmers should be paid to do nothing (ie leave fields fallow) because this will reduce CO2 produced in growing the crops. But this is only the case if such CO2 in the production phase is larger than the CO2 absorbed from the crop's growth. So if Waxman-Markey passes, we will have expensive energy provisions based on the assumption that Co2 used in crop production simultaneously both is and isn't greater than CO2 absorbed in growth. Outstanding.

By the way, for those who still haven't figured out the power of the farm lobby, note that while farmers are paid not to do their business, no other class of individual or industry will recieve similar payments.

In our new corporate state, does anyone think this decision was made purely on the business merits? Note that the only people mentioned or commenting in the article (other than a GM and UAW PR flack) are politicians of the various states.

Having lobbied hard for the stimulus bill with the expectation they could get some extra local spending without the political cost of having to tax the locals more to pay for it, Americas mayors find they in turn got played:

Vice President Joe Biden has been holding private conference calls on the stimulus with elected officials from around the country, some of whom have been telling him that metropolitan regions are losing out to rural areas in the competition for stimulus money.

That argument tracks a report released by the U.S. Conference of Mayors that concluded that cities have gotten a disproportionately small share of stimulus money set aside for road and other transportation improvements.

I thought the following was particularly hilarious. It appears that the mayors have abandoned progressive tax policy in favor of a more classical notion of fairness:

The mayors commissioned a report looking at a pot of $18 billion set aside for transportation. When the report was released this month, the 85 most populous metropolitan areas had received $8.8 billion - or 48 percent of the total. Yet those same areas account for 63 percent of the U.S. population and 73 percent of the gross domestic product, the report said.

Chicago would need to get another $250 million in stimulus transportation funds to reach a level that reflects its contribution to the Illinois economy, the report calculated. In Ohio, Cleveland and Cincinnati account for 40 percent of the total economy yet received less than 5 percent of the transportation stimulus funds earmarked for the state.

I am sure the richest 10% who pay the vast majority of the taxes will be happy to know that the mayors are now advocating that stimulus money be spent in proportion to how people contribute to the economy. Yeah, you can hold your breath for that. It turns out that progressive redistribution is only a good thing if you are on the recieving end.

The Antiplanner observes, in the context of the Washington metro crash, that governments are happy to appropriate funds for expensive new facilities, but almost never want to appropriate funds for capital replacement and refurbishment of such facilities 20-30 years later. Such refurbishment is nearly always necessary. Private businesses plan for it -- for example, oil companies plan and budget on the assumption that all of their gas stations will need to be torn down and rebuilt every 20-25 years.

I work with public recreation a lot and can say that the exact same problem exists -- politicians love funding a new park or visitor center or museum expansion, particularly if they can get their name on it, but consistently refuse to fund capital replacements decades later when these are needed. I guess they are unsexy.

This is OK, because when it inevitably creates problems, those problems can again be blamed on a failure of free-market capitalism.

Two U.S. Democratic lawmakers want Fannie Mae and Freddie Mac to relax recently tightened standards for mortgages on new condominiums, saying they could threaten the viability of some developments and slow the housing-market recovery....

In March, Fannie Mae said it would no longer guarantee mortgages on condos in buildings where fewer than 70 percent of the units have been sold, up from 51 percent, the paper said. Freddie Mac is due to implement similar policies next month....

In a letter to the CEO's of both companies, Representatives Barney Frank, the chairman of the House Financial Services Committee, and Anthony Weiner warned that a 70 percent sales threshold "may be too onerous" and could lead condo buyers to shun new developments....

In addition to the 70 percent sales threshold, Fannie Mae will also not purchase mortgages in buildings where 15 percent of owners are delinquent on condo association dues or where one owner has more than 10 percent of units, as the firm sees these as signals that a building could run into financial trouble, the paper added.

During and after the Obama proposal for lots more government spending on long-distance rail lines no one will ride, there was a lot of discussion about how European railroads make money with high speed lines. This sounded like BS to me, from my experience. Years ago I consulted briefly with the SNCF, the state railroad of France. Just as one example, we found they had something like 100,000 freight cars and 125,000 freight car mechanics. I tongue-in-cheek suggested they could assign each guy his own car to ride with full time and fix if necessary and still cut staff by 20%.

Anyway, it turns out the profitability claim is BS. The Antiplanner links to this study by the Amtrak inspector general. Here is the key chart, with the green the "reported" profits. But it turns out they book subsidies as revenue. The subsidies (including indirect subsidies like taking railroad pensions into the national system and off the railroad's books) are in red.

Postscript: I have always been amazed that greens get all misty-eyed at European rail. Sure, its cool to ride a fast train, but the cost of having an extensive passenger rail system is that most of Europe's freight pounds along highways, rather than via rail. In the US, the mix is opposite, with few passengers on trains but much more of our freight moving by rail. I would have thought that preferentially moving freight over rail rather than passengers was a much greener approach.

It turns out, the first $100 million a mile extension of Phoenix light rail is having to be postponed. The reason? Its just too much money for the local pols. So why is this one piece being postponed when any number of other extensions, such as the $230 million a mile airport extension, still going forward? Well, it turns out that all those other lines (as well as the original) use large dollops of federal money, while the delayed extension was planned to use only local money.

It turns out that we are not willing to pay the full freight of building light rail for ourselves, and only want to do it if we are able to grab at least half the cost from people outside of Arizona. AZ Republic story

A while back I worried that frequent, random, and unprecedentedly extensive Obama interventions in the economy and private commerce could well cause any economic recovery to stagnate as businesses sat on their wallets waiting for more clarity. Though the ins and outs of the Great Depression are endlessly debated, there is good evidence that the Depression was extended by just this effect, in particular by the effects of the National Industrial Recovery Act, America's flirtation with Mussolini-style fascism.

Economist MaxedOutMama (who, to her credit, was sounding alarms last year long before most everyone else including me were) says that there is still a lot to be worried about and that businesses are indeed sitting on their wallets:

The rolling four-quarter change for GDP is now -2.5%. Far more frightening is the same figure for gross private domestic investment, which in Q1 was -23.6%, and has now been falling since fourth quarter 2006! Gross private domestic investment is the fundamental driver of this economy and just about every other economy, and at no time can one ever rack up a such a string of GPDI decreases in an economy without generating a pretty intense recession.

That is the first thing on which every realistic economist must stay concentrated. Talk about a credit crisis does not address the fundamental economic operator, and dumping a lot of stimulus money into the economy will not overcome a recession produced by collapsing GPDI unless it boosts domestic investment - which our stimulus package does not.

In fact, I would argue that government actions over the last 6 months, from executive compensation controls to Waxman-Markey to health care "reform" all do just the opposite -- suppress investment by increasing uncertainty.

By the way, the inflation I have been promising for a while has obviously not occured yet. The Fed says they have it under control.

The Federal Reserve signaled Wednesday that the weak economy likely will keep prices in check despite growing concerns that the trillions it's pumping into the financial system will ignite inflation.

Fed Chairman Ben Bernanke and his colleagues held a key bank lending rate at a record low of between zero and 0.25 percent. And they pledged again to keep it there for "an extended period" to help brace the economy.

Inflation is this massive rock that takes a while to start moving. The Fed has pushed the rock right to the top of the mountain but says not to worry, if it starts accelerating down the hill they will be able to stop it. Don't believe it.